ANNOUNCER (voice-over): Starting right now on the special edition of THIS WEEK, an ABC News exclusive: for the first time ever, our cameras revealing the Persian Gulf nerve center, the heart of the U.S. campaign to take down ISIS.

Martha Raddatz with the men and women fighting America's most dangerous enemy.

Plus the GOP's man to beat, Wisconsin Governor Scott Walker is Iowa's early front-runner. Jon Karl with the exclusive interview.

And making history: the first Triple Crown winner in 37 years. Did American Pharaoh just put horse racing back on the map?

From ABC News, THIS WEEK with George Stephanopoulos begins now.

(END VIDEOTAPE)

MARTHA RADDATZ, ABC NEWS CORRESPONDENT: Good morning. I'm Martha Raddatz. We're coming to you from a Persian Gulf nation that we've been asked not to disclose, where the U.S.-led military operation against ISIS is being coordinated. Temperatures here hovering around 120 degrees.

Behind me you see one of the Predator drones or as the Air Force calls them, remotely piloted aircraft. And that's a Hellfire missile hanging below. They fly 24/7, collecting intelligence and carrying out deadly airstrikes.

I'm about to take you inside the heart of the command center of the U.S.-led campaign to defeat the jihadist group, the first time TV cameras have been allowed inside.

Just this week, an American general saying this fight will last a generation. And as we come on the air this morning, the commander in chief, President Obama, has just landed in Germany for a series of urgent meetings with allies at the G7 summit.

A major focus: his plans to stop the disturbing ISIS surge, a strategy that has come under fire.

So we begin with ABC's chief foreign correspondent, Terry Moran, at the summit with the very latest.

President Obama's arrived in these splendid Alpine surroundings at a moment when the world is looking to him for leadership, especially in the fight against ISIS, German Chancellor Merkel welcoming the president in the small town of Krun, Mr. Obama hoisting a mid-morning beer. But the agenda here is packed, ISIS right at the top of it.

They are on the march again in Syria and Iraq. And once again Iraqi troops just running away from the battlefield in Ramadi. Defense Secretary Carter saying they showed no will to fight.

So President Obama will meet here with the Iraqi leader, Prime Minister Abadi. He wants a lot more U.S. assistance in the fight. Americans are disappointed in him. They don't see him as the leader for change and reconciliation they'd hoped.

Mr. Obama, since the beginning of his presidency, has been trying to extract the U.S. from its deep entanglements in the Middle East, but events keep dragging him back. And the leaders here, they don't think his strategy against ISIS is working and they want to see him step up his game -- Martha.

RADDATZ: Thanks, Terry.

Now inside the U.S. headquarters to take down ISIS, this joint operation space in the Persian Gulf is where the U.S. military coordinates every airstrike, all the intelligence for today and the future, comes through here. It was one year ago today that ISIS swept into Mosul in Iraq, pulling the U.S. into a war we thought had ended.

Right now we're going inside the massive operation center and going one-on-one with the general commanding the mission to defeat ISIS for good.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: This is really the centerpiece of our current operations in Iraq and Syria.

RADDATZ (voice-over): Here in this command center the war room of all war rooms in the battle against ISIS, the fight is 24/7. Video feeds flow in from the battlefield and every bit of intelligence, from satellite feeds to Twitter feeds, monitored, minute by minute.

RADDATZ: So this is really where you coordinate everything, the whole battle space.

UNIDENTIFIED MALE: That's correct. This is where the kind of the current operations pieces are happening.

RADDATZ (voice-over): There's a fires desk, coordinating airstrikes on Syria and Iraq, the intelligence desk, social media, logistics and spots for all the coalition partners.

RADDATZ: What are we looking at now?

UNIDENTIFIED MALE: You're seeing the final results of the aircraft acquiring a particular target --

(CROSSTALK)

RADDATZ: In other words, when the missiles are fired and the bombs are dropped.

UNIDENTIFIED MALE: Correct.

RADDATZ (voice-over): This is the first time cameras have been allowed in.

RADDATZ (voice-over): A battlefield that a year ago was just emerging.

Last June ISIS, also known as daish, firmly stamped its name across the map of the Middle East, marching with terrifying speed across Syria and Iraq, grabbing world attention as it quickly overran Mosul, Iraq's second largest city, even threatening Baghdad.

I was there last June when Iraqis were volunteering in droves to protect their capital.

RADDATZ: There seems to be an incredible zeal among these young men. They seem absolutely fearless. But they really have no idea what they're getting into.

RADDATZ (voice-over): And neither did the rest of the world. Today, the U.S. is back at war with more than 3,000 troops on the ground in Iraq conducting more than 3,400 airstrikes in Iraq and Syria and spending more than $2.5 billion.

In charge of this massive effort known as Operation Inherent Resolve is Lt. Gen. James Terry.

LT. GEN. JAMES TERRY, OPERATION INHERENT RESOLVE: I think there's progress in the campaign in a whole range of places. We're starting to see daish seek cover in terms of physically digging in to positions, the first phase of that campaign was Halt Daish (ph). We feel like we have done that.

RADDATZ: Do you believe you've halted?

TERRY: I do.

RADDATZ: ISIS?

TERRY: I do.

RADDATZ: It doesn’t look that way.

RADDATZ (voice-over): Recent images paint a different picture of the enemy, overtaking the Iraqi city of Ramadi, setting off 30 massive car bombs, some suicide bombs, using American Humvees, stolen from fleeing Iraqi forces. Retaking that city is now the next main objective.

RADDATZ: You think they're ready to go?

TERRY: I think they're preparing to go right now.

RADDATZ: So you wouldn’t say hold back until you know what you're doing here?

TERRY: I think they've got some things they have to put in place. And I think they're making the necessary moves to do that.

RADDATZ (voice-over): General Robert Castellvi is just out of Iraq, where he worked directly with Iraqi forces.

GENERAL ROBERT CASTELLVI: They are ready to go in. We have assisted them in developing a campaign plan, to be an operational plan, to be able to go back in. They've already started going back in.

RADDATZ: So they've started to try to retake Ramadi?

CASTELLVI: They've already started.

RADDATZ: You've been in Iraq before. You've seen the billions of dollars we spent on this effort.

Why will it work this time?

CASTELLVI: It's going to work. It has to work. This time I think -- I think they're much more embracing of the training; they're much more embracing of the equipment that we're bringing.

RADDATZ (voice-over): Key to supporting Iraqi troops as they take back Ramadi, U.S. and coalition airstrikes.

RADDATZ: This is an MQ-1, a remotely piloted aircraft -- or as we call them, drones -- they are in the fight 24/7, over Iraq, over Syria, armed with Hellfire missiles.

RADDATZ (voice-over): How those missiles reach their targets is the center of a heated debate.

Should U.S. troops be on the front lines with the Iraqi security forces?

Side-by-side, helping to call in those airstrikes, the troops who would be there, JTACs, or joint terminal attack controllers. Right now this JTAC veteran of 12 deployments has been calling in those strikes remotely from a strike cell in Iraq. If it was up to him, the JTACs would be forward in the fight.

UNIDENTIFIED MALE: I think it would -- we'd find it an easier way of doing it.

RADDATZ: More effective in getting more targets?

UNIDENTIFIED MALE: More effective, yes.

RADDATZ (voice-over): But even though they're not up close, they can see how ISIS has adapted to the firepower being aimed their way.

UNIDENTIFIED MALE: They have more of a tactical head. They're more disciplined than I've seen in the past. They're more of a fighter then they're fitting back and planting the ideas more.

RADDATZ: Right now, they’re doing horrible things and throwing people off the top of buildings.

Do you think about that?

UNIDENTIFIED MALE: I think they all need to die.

RADDATZ (voice-over): General Terry says plenty already have.

RADDATZ: We keep hearing about numbers of fighters who were killed, number of ISIS fighters. You heard the deputy secretary of state the other day say 10,000 ISIS fighters.

Do you know that's true?

TERRY: That's a good number.

RADDATZ (voice-over): And Terry takes pride in what he says are a very low number of civilian casualties in the airstrikes. But he knows this fight will be a long one.

TERRY: I think it will take time. I think there will be ups and downs. Let's continue to work with the Iraqis and make them successful. And I think that's the -- I think that's the way ahead.

(END VIDEOTAPE)

RADDATZ: Turning now to the man who was the former joint special operations commander in Iraq and Afghanistan, retired General Stanley McChrystal. He's also the author of "Team of Teams."

General McChrystal, I want to start right away with what Lt. Gen. Terry just said. He said they have halted ISIS.

Do you agree with that?

GEN. STANLEY MCCHRYSTAL, U.S. ARMY (RET.): Well, I certainly don't doubt what General Terry said. I would say more broadly, however, what they've got to do is halt the spread of ISIS in people's minds. Because what ISIS has done more than anything is convince people around the world, but particularly in the region, that they’re unstoppable and they're everywhere.

RADDATZ: So, do you think we're approaching this in the correct way? I'm obviously at a military base, should the military be doing what it's doing?

MCCHRYSTAL: Well, I think there are certain military activities that are necessary, particularly in the near-term. But in the more broad term, I think you need to build a coalition that is credible and legitimate across the region: the Gulf states, Turkey, the United States, Iraq and others. Until we sense that, then I think ISIS is going to have the ability to go against what they see as a fragmented set of opposing forces.

RADDATZ: And you've heard the numbers, you've heard how many they believe -- how many fighters they believe have been killed. You were in charge of special operations when al Zarqawi was killed in Iraq. If they find al-Baghdadi, the leader of ISIS, will that really be a blow to this type of organization?

MCCHRYSTAL: Well, it will be a blow of a sense, because destroying an iconic leader undermines confidence, but you can't a play a numbers game in this kind of effort, you can't count how many people you've killed, particularly how many leaders, because they're replaceable.

What you've got to do is destroy the fabric of the organization, their ability to communicate. And that's a little bit more intangible and takes a wider, more holistic effort.

RADDATZ: And what would you do? Talk in more detail about that, specifically this military campaign as you see it. We know what happened in Ramadi. We know it's been a year. Mosul is still under ISIS control.

MCCHRYSTAL: Yeah, if there is a sense that our efforts of airstrikes or other special operations raids are episodic, or even spasmodic, if that is the impression given then in fact the enemy will gain confidence.

We have got to build a network. As we used to say, you have to have a network to defeat a network. And that network has to be something that our side believes in, and that the opposition, in this case ISIS, believes is strong enough and connected enough to be effective everywhere. That takes a long effort building a coalition, to build a team of teams as I'd say, Martha.

RADDATZ: Do you think we need more American boots on the ground and more towards the front lines in the battlefield?

MCCHRYSTAL: Well, if the United States can provide help in building the fabric of this network, if that means you put small elements forward, helping Iraqi forces build confidence but also bring in high tech aircraft and things like that, then I think that would be helpful.

It's giving the network the continuity that it needs to be effective, that I think could be our biggest contribution.

RADDATZ: Thanks very much for joining us, General McChryrstal.

MCCHRYSTAL: My pleasure.

RADDATZ: The fight against ISIS here in this part of the world comes just days after what police say was the takedown of an ISIS sympathizer in Boston determined to kill police officers bring the threat of this group to the homeland.

Also this week, that massive cyber attack on the U.S. government, compromising data on millions of federal workers. China strongly suspected in the attack. I'm joined now by Michael Leiter, the former director of the national counterterrorism center.

And Michael, I want to start with the attack in Boton which they say was going to be on police, Usama Ramin was killed by Boston police. He had been under surveillance for some time. It seems like it really worked in this case.

MICHAEL LEITER, FMR. DIR. NATIONAL COUNTERTERRORISM CENTER: I think the system did work, Martha. Obviously a tragic ending with his death, but the front lines are obviously not just where you are, they are in Boston as well, and they're in other cities. And as the director of the FBI has said, they now have active investigations in every state in the country of ISIS sympathizers. And in this case, they saw someone who was becoming radicalized, who may have been taking steps to really execute on some sort of attack, whether small or large, and they tried to disrupt it. And in that disruption he was killed.

But this is what I think we want our intelligence and law enforcement officials doing here in the homeland.

RADDATZ: I want to move to this hack -- 4 million federal employees, China suspected in this. This seems like an epic failure of our cyber security.

LEITER: Well, it certainly is not a success. The office of personal management that was hacked has seen previous hacks before. And this is a breach of a huge number of records, which really can be valuable to a state like China that is trying to pursue espionage in other places.

And I think the U.S. government has already said some basic sanitary steps were not taken in this case. The information was not encrypted. So what is clear is that as we detect one threat and try to defeat one threat, these other cyber threats are coming in through different angles. And it's going to be a constant game of cat and mouse to adjust our defenses to very sophisticated attackers.

RADDATZ: What could China do with this type of information? There were security clearance information, all sorts of personal information, what could they do with that?

LEITER: Some had questioned the value to a state like China, but this really is invaluable to a country that is trying to collect information for the next step of intelligence collection.

So you can now understand who works where in the U.S. government. You can understand some of their private information. And that can be stepping stones to the next network attack, or the next human intelligence operation to recruit individuals that might provide more valuable information to China in the future.

So, the information they captured now may not be the crown jewels, but it can help get them to other information, which is more valuable to them in the future.

RADDATZ: And quickly, Michael, if you will, is there a fix for this?

LEITER: The fix is constant. The fix is constantly adjusting our defenses. And it's continued engagement with the Chinese and the global community to try to deter this sort of activity.

But we've tried this in the past. It has not been immediately successful. This will be a multi-year effort and it's going to be very hard to deter the Chinese from doing this in the future.

RADDATZ: A lot of work ahead. Thanks very much, Michael.

We'll have much more from here later.

But now we go to my colleague Jon Karl in Washington. He has all of the latest on the very big 2016 week, including an exclusive interview with the man who many are calling the early Republican frontrunner -- Jon.

JONATHAN KARL, ABC NEWS CORRESPONDENT: That's right, Martha.

Our interview with Scott Walker is coming up. And the incredible story behind that history making Triple Crown win for American Pharaoh.

(COMMERCIAL BREAK)

WALKER: "I love a senator who knows how to castrate a pig, ride a hog and cut the pork from Washington, DC. Now wouldn't it be nice if she had an ally in the White House to help get the job done?"

KARL: THAT WAS THE MAN MANY NOW SAY IS THE NEW REPUBLICAN FRONT-RUNNER - WISCONSIN GOVERNOR SCOTT WALKER-- TALKING ABOUT FRESHMAN SENATOR JONI ERNST. SHE'S THE REPUBLICAN BEHIND THE "ROAST AND RIDE" - WHO MAY BE IOWA'S NEW KINGMAKER. (ON CAMERA) I WAS OUT THERE AND HAD A CHANCE TO TALK TO WALKER BEFORE HE JUMPED ON HIS HARLEY.

HE’S NOT QUITE A DECLARED PRESIDENTIAL CANDIDATE YET, BUT AS WE SAW HERE IN IOWA THIS WEEKEND, SCOTT WALKER IS ALREADY HITTING HIGH GEAR – RACING TOWARD THE FRONT OF THE PACK ON HIS HARLEY, AND IN THE POLLS.

KARL: So Governor Walker, you’re up in the polls nationally. You got a big lead here in Iowa, are you the frontrunner now?

WALKER: Well, I think Governor Bush is still probably up there up front because he’s going to have more money than just about all of us combined, but we're feeling good.

KARL: You said not long ago that people don’t want an anointed leader in America. They don’t want someone whose part of a monarchy or legacy. You were talking about Hillary Clinton. But doesn’t that apply to Jeb Bush, too?

WALKER: Well, I mean I think it's really the context. I hope people, I hope Republicans, I hope independents and even some discerning Democrats will see that we're striking a stark contrast with Hillary Clinton. You know, we're a new fresh face taking on someone from the past.

KARL: But you have to run in the Republican primary first. Jeb Bush, this would be the third Bush. You’re talking about a monarchy, a legacy. Doesn’t that apply to Jeb?

WALKER: Well, I think it’s one of those where in a Republican primary people want to see how you’re going to step and contrast yourself from Hillary Clinton. And the fact is she’s not going through a primary, or at least not a real primary. She's not going to be highly contested out there, I think is a disadvantage not just for the Democrats, it’s a disadvantage for the American people.

KARL: So you said that the nominee should be a governor or a former governor and the running mate should be a governor or a former governor. Do you still believe that?

WALKER: Well I think overall governors bring tremendous experience. I mean, we have to surround ourselves with a cabinet of people who are smart or smarter than we are on any given issue. I think that’s what makes for a successful governor in either party. It’s precisely what makes for a successful president in terms of a cabinet and leadership.

KARL: So would you categorically rule out a senator like Marco Rubio?

WALKER: No, I mean I think my preference then and it still is today that I think governors are well-tested leaders because they don’t just talk about it and give speeches. They have to do it. But someone like Marco Rubio I have real confidence in.

WALKER IS BEST KNOWN FOR HIS CONTROVERSIAL STAND AGAINST UNIONS IN WISCONSIN – HE FENDED OFF A RECALL CHALLENGE, AND WON RE-ELECTION IN NOVEMBER.

KARL: So one of your central promises was that you were going to create 250,000 private sector jobs in Wisconsin. When I asked you about that two years ago, you said you would get it done…

SOT Walker: “We're still committed, by 2015, which is our goal -- it's a little bit less than two years away -- to get to 250,000.”

KARL: But you haven’t done it. You fell quite a bit short.

WALKER: Yeah, we set a big bold goal. We created over 150,000 jobs in these first four years. We went from 8.1 percent unemployment the December before I took office to last month we nearly cut that in half to 4.4%, well below the national unemployment rate. We’re going to continue to aim high both in our state, and if I were a candidate for president of the United States, I would aim high there as well.

KARL: But that was a central promise. You fell significantly short, so should we expect you to fall short of the promises you're making now?

WALKER: Well, you look at all the other promises we made. Four years in a row, property taxes are lower now than we started. We froze tuition, we fixed the budget from 3.6 billion in a hole to surpluses. The rainy day fund is 165 times bigger than when we took office. Schools are better. You look at one promise after another. We fulfilled it.

BUT WALKER FACES QUESTIONS ABOUT HIS LACK OF FOREIGN POLICY EXPERIENCE – INCLUDING THIS JAB FROM THE PRESIDENT.

SOT OBAMA: Perhaps Mr. Walker, after he's taken some time to bone up on foreign policy, will feel the same way.

KARL: President Obama said you needed to bone up on foreign policy. And I guess you've been doing it? I mean you've been traveling, you've been talking to foreign policy experts.

WALKER: Yeah. I thought it was interesting for the president to say that, the guy who called ISIS the JV squad and Yemen a success story somehow suggesting that someone else should bone up on foreign policy. But we have. We've been to Israel, I've talked to David Cameron in the UK, we've been elsewhere. My belief is if I'm gonna even think about running for president of the United States, it’s not about preparing for debates, it’s about being prepared to be the president of the United States.

KARL: Okay, you've been very critical about how the president handled ISIS. Some are out there like Lindsey Graham saying we should send 10,000 U.S. ground troops right now to Iraq to help with this fight. Do you favor that?

WALKER: I think we shouldn't rule anything out. It's a big mistake this president has made here and elsewhere about saying how long we would go or how much we would invest.

KARL: I'm not talking about ruling it out, I'm saying would you do that, would you send...

WALKER: No, I'm not arguing that's the first approach. But I'll tell you three specific things I think we should do in Iraq. First we should re-engage the strength of the American forces that are there. Once you do that, you empower our allied forces that are there on behalf of Iraq to reclaim the territory that ISIS has taken. And third, you just need to do it in a way that doesn't provide safe haven in the places like Syria as you push them out.

KARL: So you would not send combat troops now to Iraq?

WALKER: No, I believe right now we have a capacity to reclaim Iraq with the Iraqi forces that are there as long as we unleash the power that is already there of the American armed forces.

KARL: Would you rule out a full-blown U.S. re-invasion of Iraq and Syria?

WALKER: I don't think we should ever send a message to our foes as to how far we're willing to go.

KARL: So you wouldn't rule out a full blown re-invasion...

WALKER: I would not rule out boots on the ground.

KARL: No, but I'm asking about a full blown re-invasion of Iraq if that's what it takes...

WALKER: If the national interest of this country are at stake, here at risk in this country or abroad, that's to me the standard to me of what we do for military engagement.

MEANWHILE WALKER, THE SON OF A PREACHER, HAS BEEN COURTING SOCIAL CONSERVATIVES HERE IN IOWA – MANY OF THEM CONCERNED ABOUT THAT BIG DECISION EXPECTED FROM THE SUPREME COURT THIS MONTH.

KARL: If the Supreme Court establishes that same sex marriage is a constitutional right, does that effectively end this as a political issue in this campaign?

WALKER: Well, I personally believe that marriage is between one man and one woman. If the court decides that, the only next approach is for those who are supporters of marriage being defined as between one man and one woman is ultimately to consider pursuing a constitutional amendment.

KARL: So you would favor a constitutional amendment that would say that states are allowed to ban same sex marriage.

WALKER: I believe that the decision on defining marriage should be left up to the states, yeah.

KARL: We had another big cultural moment. President Obama said Caitlyn Jenner coming out like that was an act of courage. Do you agree with that?

WALKER: Well, I think it’s a personal decision. And to me, I don’t know that there’s anything more to comment on. It’s a personal decision.

--Walker with Crowds

WALKER LOOKS, SOUNDS, AND ACTS LIKE A PRESIDENTIAL CANDIDATE, BUT HE STILL HASN’T MADE IT OFFICIAL

KARL: OK. And when are we going to hear your decision?

WALKER: Well, the budget will be done hopefully by the end of June. Shortly thereafter, we’ll announce our intentions.

KARL: OK. Governor Walker, thank you for joining us. Appreciate it.

WALKER: Good to see you.

ANNOUNCER: Here it is. The 37-year wait is over! American Pharaoh is finally the one! American Pharaoh has won The Triple Crown.

(END VIDEO CLIP)

KARL: It was a race for the ages -- American Pharaoh’s no doubt about it Triple Crown win. It took 37 years, but this morning there is a new legend in horseracing and ESPN reporter Jeannine Edwards is at Belmont Park where history was just made.

And Jeannine, did I see you just talking to the trainer of American Pharaoh and petting the new Triple Crown winner?

JANINE EDWARDS, ESPN: That’s right, Jon. And I can only say it was the most surreal moment I have ever experienced and I think those around the horse would describe it the exact same way. I’ve been involved with thoroughbread racing in one capacity or another for 35 years. Bob Baffert just brought American Pharaoh out here to this little courtyard behind me, surrounded by media. And the horse was just standing there with dozens of people around him petting him, and Bob Baffert just standing there like a proud father with his child and soaking it all in.

And I can tell you there was not a dry eye around there because that is one of those moments that you will never forget.

KARL: Wow, so tell me, quickly, what does this mean for horseracing to, after 37 years, have another Triple Crown winner?

EDWARDS: It means that the critics will be silenced. It means that those who have been saying that the Triple Crown is too difficult, it needs to be changed, the timing, the distance of the race, something needs to change. It means that all we really needed to wait for was a special horse, a horse that is superior to all others, and that the stars would align to bring everything together for this happen.

And that’s exactly what we witnessed yesterday. It was absolutely spine-tingling. I had chills as I heard the crowd.

KARL: Wow, well, an incredible experience. Thanks for sharing it with us, Jeannine.

EDWARDS: Thank you.

KARL: All right, our round table is here. Former House speaker and CNN political commentator Newt Gingrich, Democratic strategist Donna Brazile, former Labor Secretary Robert Reich, and ABC political analyst Matthew Dowd.

Lots of politics to get to, but I want to start with the race. We all saw that moment. Speaker Gingrich, 1978 was the last time we had a Triple Crown winner. That was the year you got elected to Congress for the first time!

NEWT GINGRICH, FORMER HOUSE SPEAKER & CNN POLITICAL COMMENTATOR: I know, which is a sign it’s been a long, long time. And I think people were excited at the proof you could still have a Triple Crown winner. It’s a remarkable thing.

DONNA BRAZILE, DEMOCRATIC STRATEGIST: What a wonderful horse. I mean, look, I like horseracing. I used to -- I told the Speaker, I used to go to Jefferson Down back in my day.

But you know what, what a graceful jockey. I mean, that was his second attempt to try and win a Triple Crown. He did it. Great trainer. It proves that if you have a great trainer, a great horse, and a great jockey, you can ride to victory.

KARL: And the emotion of this. You heard them describe -- like these are hardened reporters, sports reporters ,with tears in their eyes, getting a chance to pet that horse.

ROBERT REICH, FORMER LABOR SECRETARY: Well, it’s not just -- people these days, with all the lousy news, just wants to think it is great out there, they can (INAUDIBLE) on. And I just want to mention, you know, Victor Espinoza is a fabulous jockey, of Mexican origin. 43 years old, he’s not all that young, and it’s 5’2”.

BRAZILE: All right.

(CROSSTALK)

MATTHEW DOWD, ABC POLITICAL ANALYST: Last time I -- there was a Triple Crown winner, I had just gotten my driver’s license in high school. I think this is such a great quintessential American story, right? So you have an Orthodox Jew owner from Egypt. You have a substitute -- a former substitute teacher, rancher from Arizona, and a jockey from Mexico on American Pharaoh. So I think this is such a quintessential American story.

GINGRICH: This is the American story!

DOWD: Exactly.

KARL: All right, we’re just getting started. So much 2016 news to get to, including my interview with Scott Walker. Plus we have the very first national interview with Iowa senator Joni Ernst, and she’s got our powerhouse puzzler.

(BEGIN VIDEO CLIP)

SEN. JONI ERNST (R), IOWA: Hi Jon. Here’s the question. In the last year, how much of the nation’s pork was produced here in iowa?

(END VIDEO CLIP)

KARL: Right back with the answer.

ANNOUNCER: The powerhouse puzzler is brought to you by Boyle Financial.

(COMMERCIAL BREAK)

KARL: So what percentage of our country’s pork was produced by Iowa over the past 12 months? Let’s see who knows their Iowa pork. Speaker Gingrich says 40 percent.

GINGRICH: Forty.

KARL: Donna, 60 percent. 38.2, I love the precision.

REICH: I want to be (INAUDIBLE).

KARL: A third, Matthew Dowd.

All right, here’s the answer, from Senator Ernst.

(BEGIN VIDEO CLIP)

ERNST: And the answer is 33 percent of the pork produced in the United States was done right here in Iowa.

(END VIDEO CLIP)

KARL: And Matthew Dowd nails it.

Back with Scott Walker.

DOWD: I love bacon.

(LAUGHTER)

(COMMERCIAL BREAK)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

HILLARY CLINTON (D), PRESIDENTIAL CANDIDATE: Governor Perry is hardly alone in his crusade against voting rights. In Wisconsin, Governor Scott Walker cut back early voting and signed legislation that would make it harder for college students to vote. In New Jersey, Governor Chris Christie vetoed legislation to extend early voting. And in Florida when Jeb Bush was governor, state authorities conducted a deeply flawed purge of voters before the presidential election in 2000.

(END VIDEO CLIP)

KARL: That was Hillary Clinton attacking her GOP rivals by name for the first time since she kicked off her presidential campaign.

We are back with the roundtable.

If you look at this race, our last national poll, ABC News/Washington Post, showed a seven way virtual tie among Republicans. So, I mean, what is -- who is the frontrunner here?

GINGRICH: There is no frontrunner. I mean, despite -- I thought Walker was very clever to say, you know, Bush is the frontrunner. But the fact is this is maybe the most open nominating process in the Republican Party, as you pointed out earlier, since 1856 or something like that.

But literally I think it is wide open. And nobody could tell you right now how any particular person has an automatic march to the nomination.

KARL: Matthew?

DOWD: Well, to me there's -- it's a little bit like “Ocean's 11” and the Republicans are still looking for George Clooney in the course of this. And it could be the Dirty Dozen. And it could be “Sixteen Candles”. A number of things.

I don't think it's a downside to have this many candidates running. A lot of people are saying this is bad. This isn't good.

If you remember in 2008, there was double-digit number of Democrats running for president in 2008. And in 1992, the last time we had a dynasty which Bill Clinton, there was double-digit candidates running in '92 and Bill Clinton had just given a horrible speech. He wasn’t the political genius that we all now say he is and he wasn’t a dominant figure.

He emerged in that process. I still think with all these candidates the Republicans have an opportunity for somebody to emerge, whether they're in the race now or they're about to get in the race.

REICH: Well, undoubtedly somebody will emerge. The question is will they emerge in kind of shape to take on the general election. In order to distinguish yourself, whether you have 10 or 15 opponents, you're going to have to either move right on social conservative or move right on business or you're going to have to move right on both.

And the leap back to the center for a general election is going to be much, much harder under those circumstances.

BRAZILE: But you know, this field will be winnowed out at some point before Christmas. And the fact is is that even with the star poll being downplayed, that's a mark. And then the first debate that FOX News will host, that's going to also be a marker.

So right now, I think the more the merrier. This is like 1976 when I got active. The long shot candidate was Jimmy Carter. I liked his smile. Somebody's going to find someone on the Republican side that they like. And especially now in New Hampshire. They will attach themselves to one of these candidates based on their ideas. And that person will become the flavor of the week.

KARL: So Jeb Bush has now given us a date, June 15th. And I'll tell you, Democrats I’ve been talking to for months had been assuming that he was the frontrunner.

But would you give an odds? Speaker Gingrich, what -- yes, what, of Jeb Bush winning the nomination. I mean, is he -- you said he's --

(CROSSTALK)

KARL: -- not the frontrunner. Is he the underdog?

GINGRICH: I'm going to get hammered here by the professor over there, but let me just say of the seven to 10 really serious contenders, the odds on each of them is one in five.

KARL: OK. One in five.

(LAUGHTER)

KARL: That's very good.

(CROSSTALK)

DOWD: I think there was a false premise about Jeb from the beginning of this. Because if you looked at the numbers, the only reason why people are saying Jeb was the dominant candidate was because one of his last times -- which turns out to be more of a negative than a positive what people thought.

And two was the idea that he was going to raise all this money. But the problem now today -- not the problem, the opportunity now today -- money doesn't matter as much because of the ability for people to get out there, ability to be able to get exposure and it doesn't depend unnecessarily on advertising.

I think Jeb's got a real problem. If you take a look at the first few states, he's fifth or sixth in Iowa. He's not dominating in New Hampshire and he's not doing well in South Carolina.

And if you go through those first three states, no matter how much money you have, and you lose all those first three states as Jeb Bush, you cannot win the nomination.

(CROSSTALK)

REICH: I think you're right except for one thing: I mean, Jeb Bush is still --

DOWD: So how many is that? What percentage?

(LAUGHTER)

REICH: Jeb Bush is still the establishment candidate. And what the Republican Party still does -- I think it's going to do it this time again -- is the establishment Republican Party does trump the disestablishment (ph) --

(CROSSTALK)

DOWD: When John Kasich -- when John Kasich gets in the race, when he gets in the race, he will become the establishment candidate.

REICH: I don't know about that.

BRAZILE: Not for long.

KARL: So if you look at the issue set here, one of the interesting things is the rise among Republicans even of this issue of rising income inequality.

“New York Times/CBS poll said -- asked the question, should government do more to reduce the income gap, 57 percent saying yes.

And in the structure, you're seeing Republicans talk about this.

REICH: Yes, Republicans, this is a big, big shift for Republicans. They're actually coming right out of the gate, as it were, talking about income inequality.

But there is a kind of cognitive dissonance between their talking about income inequality but then when it comes to the actual policies, it's the same old Reaganomics, trickle-down economics, give tax cuts to the big corporations, don't raise the minimum wage.

I mean, we're seeing the same policies. But what they have to do is begin to link their rhetoric about income inequality to actual policies.

KARL: But is that fair? I mean, we saw Paul Ryan -- I know he's not running for president -- but come out with what a lot of liberals said was a very serious anti-poverty plan.

BRAZILE: Yes. And where is it?

I mean, the rhetoric doesn’t match the record. I agree with the professor -- I don't want to call you Mr. Secretary -- but I agree.

(CROSSTALK)

BRAZILE: But look, the rhetoric doesn't match the record. And if you're really going to address income inequality, you got to really go -- you got to talk about some structural problems that we have in our economy right now.

KARL: So are Republicans going to do that?

(CROSSTALK)

GINGRICH: Notice the conversation we're having. In the sixth year of the Obama presidency, the failure palpably in places like Baltimore and Ferguson on race relations, the failure palpably on inequality, the failure palpably on economic growth, I mean, at what point does Hillary Clinton get up and say I'm the anti-Obama Democrat?

I mean, you can talk about us not having action.

You have a president who on every one of these fronts that's failing.

(CROSSTALK)

DOWD: I think economic inequality is a huge problem as it exists in the country. But the real fundamental -- in my view, the real fundamental thing that frustrates Americans is economic -- a lack of economic mobility, that they no longer believe that if they're in the lower class or the lower class are poor or --

GINGRICH: The American Dream.

DOWD: -- they’re able to move up. And that --

(CROSSTALK)

DOWD: There's been a stop on economic mobility.

REICH: But they go together, because as the middle class shrinks, there are fewer opportunities for either the poor to get into the middle class or for people in the middle class to move upward.

You know, we are seeing a -- for the first time in my memory and according to a lot of surveys for the first time in American history people who view the future pessimistically. They don't think their children are going to do as well as they are.

And this is profound. This is important. And candidates have got to speak to this.

DOWD: And I don't think Hillary Clinton -- to me, the most authentic person on this issue is Bernie Sanders, not Hillary Clinton, because if you want to talk about a record on dealing with economic inequality or economic mobility, the person that does that best is Bernie Sanders, not Hillary Clinton.

KARL: OK, so let's turn to Hillary Clinton, because you saw some really troubling poll numbers for her. You had, again, the question of favorable/unfavorable. Look at where she is among independents, Donna. You have an -- only 36 percent saying favorable; 58 percent of independents view Hillary Clinton unfavorable.

And then, of course, you have that number in the ABC News "Washington Post" poll, 52 percent, a majority, say she's not honest or trustworthy.

Those do not look like the numbers of a winning candidate, do they?

BRAZILE: Well, you know what, you know, I looked at those numbers and I went to bed that night thinking, you know what, she is still pretty much out there, talking to voters, getting the issues out and preparing, I believe, to have a very successful campaign.

Yes, there --

(CROSSTALK)

KARL: But she's got to turn it around.

BRAZILE: -- of course she's going to turn it around. But look what she's been up against. I mean, she came out of the gate and a -- she's been attacked by the 25-30 Republicans who are running each and every day. The media's complaining every day that they haven't read enough of her emails and they need more answers on Benghazi. And she's been attacked from every front.

So I'm not surprised that she's slipped in the polls. The big test for her starts now. And that is next week she cannot just go out there and just echo some of the talking points that we've been hearing. She's got to go out there with big, bold ideas. If she's able to do that, she's going to win the nomination -- and the presidency.

GINGRICH: Well, look, I think it's a great test of where we are as a country. The scandals are going to continue. The corruption overseas is going to continue. The ties to the Swedes, who now turn out to have a $26 million Clinton foundation, the ties to the Russians on uranium, the ties in Nigeria, the ties in Haiti, all that stuff's going to keep coming.

Now it may be that we're now deadened to that scale of influence purchasing and that scale of activity. If we are, that'll be an interesting test of the American --

(CROSSTALK)

KARL: Mr. Secretary, do you see any fundamental problems for Hillary Clinton's campaign and where she is?

REICH: Let's keep in mind she has been a public figure for 23 years; her polls have been going up and down and up and down. It's a roller coaster for 23 years. I think that what she has done over the last few weeks on immigration, on voters rights, on criminal defense and criminal justice system I think are very, very important statements. She's put her Republican opponents on the defensive. She's running a general election campaign already.

But I do think that the issue of sort of disclosure, of full disclosure, is a key vulnerability. She has got to -- and her husband as well -- got to just put everything out. I mean, more disclosure than every other -- any other candidate, because --

(CROSSTALK)

KARL: Does he have to stop the paid speeches?

REICH: I think he -- I would say he has to stop the paid speeches.

DOWD: To me this is not -- this is not a campaign problem. This is a candidate problem. And if you take a look at the data on her over time, the place where she drops is when she enters the national scene as a candidate. Every time she enters the national scene as a candidate, she falls in the polls, just the -- just what happened this year.

If you just take a look at this -- ignore tactics, ignore all these things, take a look at her numbers. And you look at her numbers and you look at the dynamics of the country. When the country thinks we're off on the wrong track, the country wants a change in policy from Obama and the president's job approval is in the 40s, all of those dynamics say she's unelectable.

Can she win? Yes. But she can only win is if the Republicans nominate an equally unelectable candidate or she disqualifies --

KARL: All right. On that note we're out of time.

Thank you all.

FROM THOSE HOGS…TO **THESE** HOGS

JONI ERNST IS HAVING NO PROBLEM PROVING THE RIGHT NOW SHE’S THE MOST POPULAR REPUBLICAN IN IOWA.

ERNST: I am an advocate for Iowa, I will tell you. I have invited every Republican candidate that has been participating in different events throughout the year

ERNST IS MAKING A PITCH FOR IOWA - INCLUDING IT’S BELEAGURED STRAW POLL THIS SUMMER

ERNST: I think it is important.

KARL: Mike Huckabee has said he's not going to participate in the straw poll. Jeb Bush has said no to the straw poll. Are they making a mistake by skipping it?

ERNST: Well, I -- I would like to see them here, let's put it that way. It's a great opportunity to reach a lot of voters, in a very, um, fun atmosphere.

KARL: but it did a terrible job last time in predicting who was going to win. I mean Michele Bachmann won the straw poll. She came in dead last.

ERNST: Well I would say that I still think it is a good opportunity for our candidates and for our voters.

KARL: What’s it going to take to win the Iowa caucuses?

ERNST: We have to have somebody that will express conservative views of course, and I’m looking for somebody that is very Reaganesque, someone that can reach all aspects of our voting population here in America.

KARL: So big tent?

ERNST: So a big tent, yes.

ADVICE FROM SOMEONE WHO KNOWS WHAT IT TAKES TO WIN IN IOWA. BACK IN WASHINGTON - ERNST WAS BARELY SWORN AS A FRESHMAN SENATOR WHEN SHE WAS TAPPED TO GIVE THE REPUBLICAN RESPONSE TO THE STATE OF THE UNION.

KARL: You came promising to make them squeal – has that proven harder?

Ernst: I knew it would be hard. It's always going to be hard. You have 99 other colleagues in the Senate that you have to convince that we're doing the right thing.

KARL: Is there a Democratic senator that you've become close with yet, you've gotten to know best?

ERNST: There are a number of Democratic Senators that I have worked with. I am actually co-sponsoring a bill with Senator Barbara Boxer of California.

KARL: Two peas in a pod.

ERNST: So two peas in a pod. No, I think Iowa said what the heck is going on? And I think California said, what the heck is going on?

THAT BILL AIMED AT ARMING KURDISH TROOPS IN THE FIGHT AGAINST ISIS.
BUT WOULD SENATOR ERNST – AN IRAQ WAR VETERAN - SEND *AMERICAN* TROOPS TO THE FIGHT?

ERNST: I am not ready to put ground troops in. But I think we are coming to a juncture where we will have to make that hard decision.

KARL: How would you tell those military families when so many have fought, so many have died. How do you say we’re going to go back again?

ERNST: Well first we haven’t made that determination yet. We will have to make a decision at some point. Having served in the Middle East, I see a need at some point. If we don't get this situation under control, ISIS will continue to spread. And I think most of our service members understand that. And I think many of them are ready to go back. If that call comes up, they are going to answer that call.

SHE’S A WOMAN FROM A SWING STATE WITH MILITARY EXPERIENCE – WHO CLEARLY HAS A STYLE OF HER OWN

COULD ERNST SET HER SIGHTS HIGHER THAN THE SENATE?

KARL: what do you do if whoever gets the nomination comes around and asks you to be under consideration for being the running mate?

ERNST: (laughs) Well I think that’d be nice (laughs) Did my mother ask you say that? I am serving as Senator for Iowa. I really want to work hard for Iowans and they are always going to be my first priority.

(COMMERCIAL BREAK)

RADDATZ: We have heard all the bad news about Iraq today, but we recently were given an inside look at an incredible new city rising right in the midst of the war zone, a construction project you truly have to see to believe.

(BEGIN VIDEOTAPE)

RADDATZ: The fall of Ramadi, nearly daily car bombs in Baghdad, airstrikes to halt the spread of ISIS in Iraq, not exactly brochure material when you're planning a sprawling multibillion dollar new community.

This massive building project, 100,000 housing units, is not in some U.S. suburb, it's not in some European capital, I'm standing just outside of Baghdad.

But, yes, just six miles outside of Baghdad, construction of Iraq's future is in full swing.

That's Baghdad right there.

UNIDENTIFIED MALE: Yes.

RADDATZ: Right there you can see it.

This is the new city of Bismayah, which once completed, will house 600,000 residents.

UNIDENTIFIED MALE: This is our vision for building Iraq. And so in order to do that you have to go to megaprojects.

RADDATZ: This mega community is the biggest construction project in the history of Iraq, and among the biggest and most daring in the world.

How much does a project like this mean to Iraq?

UNIDENITIFIED MALE: It means a lot. This is part of the 1 million housing units project, which we envisage for all the provinces of Iraq.

RADDATZ: Along with housing, Bismayah will provide new schools, mosques, and public safety, like police and fire, and a massive new road system will link the city to Baghdad.